Gold slides below $4,100 as Fed hike bets exert pressure ahead of US CPI
- Gold attracts some sellers on Tuesday as geopolitical risks and Fed hike bets support the USD.
- The downside seems limited as traders await the release of the US consumer inflation figures.
- The constructive technical setup backs the case for the emergence of dip-buying at lower levels.
Gold (XAU/USD) extends its intraday descent and slides below the $4,100 mark during the first half of the European session on Tuesday, reversing a major part of the previous day's strong gains to the $4,150 resistance. Firming US Federal Reserve (Fed) rate-hike expectations turn out to be a key factor driving flows away from the non-yielding bullion. Meanwhile, the US Dollar (USD) struggles to lure buyers amid mixed signals regarding the state of diplomatic talks between the US and Iran. This, in turn, could offer some support to the commodity as traders seem hesitant ahead of US consumer inflation figures.
In the latest developments around the Middle East crisis, US President Donald Trump said that there was positive momentum toward ending the war on Iran, and that a resumption of strikes is quite unlikely, declaring the conflict effectively over. However, Mohsen Rezaei, Secretary of Iran’s Supreme National Security Council, dismissed reports of active negotiations as fake news and reiterated that Washington must accept Tehran's seven conditions to end the conflict. This keeps the geopolitical risk premium in play, albeit it does little to revive demand for the safe-haven USD and acts as a tailwind for the Gold price.
Meanwhile, the US Nonfarm Payrolls (NFP) report showed last Friday that employment rose by 165K in October, surpassing even the most optimistic estimates. Moreover, the readings for August and September were revised upward by a combined 84K. Adding to this, a downtick in the Unemployment Rate to 4.1% signaled continued resilience in the economy and underpins prospects for additional Fed tightening. According to the CME Group's FedWatch Tool, traders are currently pricing in over an 80% chance that the US central bank will raise borrowing costs in December, which is seen exerting pressure on the Gold.
Traders, however, opt to wait for more cues about the Fed's future policy path. Hence, the focus will remain glued to the release of the latest US Consumer Price Index (CPI) report, which will play a key role in influencing the USD price dynamics and provide some meaningful impetus to gold. Hence, it will be prudent to wait for some follow-through selling before confirming that the XAU/USD pair's recent recovery from the $3,870 region, or the lowest since September 2025, touched last month, has run its course and before positioning for the resumption of the depreciating move witnessed over the past two months or so.
XAU/USD 4-hour chart
Technical Analysis
The XAU/USD pair holds a constructive near-term bias following the recent breakout above the 100-period and 200-period Simple Moving Averages (SMAs) on the 4-hour chart. Moreover, momentum indicators stay mildly positive, with the Relative Strength Index hovering near 57 and the Moving Average Convergence Divergence (MACD) just above the zero line. This suggests that upside pressure remains intact while not yet overstretched.
Hence, any subsequent slide could find immediate support near the 200-period SMA at $4,103 and the 23.6% Fibonacci retracement at $4,059, while the 100-period SMA around $4,042 forms a deeper cushion that would need to hold to preserve the current bullish structure. On the topside, initial resistance is seen at the 38.2% Fibo. level near $4,180, ahead of the 50.0% retracement around $4,279 and the 61.8% Fibo. retracement, close to $4,377, which together outline the next bullish objectives if buyers extend the advance.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
